World Bank hikes UAE’s 2024 growth forecast by 1.1% to 3.4%

UAE economy to grow at the fastest pace in GCC over the next 2 years

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The UAE is expected to see sustained growth of 3.4 per cent over the next two years. — KT file
The UAE is expected to see sustained growth of 3.4 per cent over the next two years. — KT file

Waheed Abbas

Published: Tue 6 Jun 2023, 8:20 PM

Last updated: Tue 6 Jun 2023, 10:25 PM

The World Bank on Tuesday revised the UAE’s growth forecast for next year upwards by 1.1 per cent to 3.4 per cent on higher oil output, reform initiatives and fresh investments.

The UAE is expected to see sustained growth of 3.4 per cent over the next two years and will be the fastest-growing economy during 2024 and 2025, it said.

“The growth outlook for oil exporters in 2024 has improved since January, reflecting an assumed rebound in oil production, the expected effects of reform initiatives, and investment drives in Saudi Arabia and the UAE,” the global lender said in its Global Economic Prospects report released on Tuesday.

However, the international financial institution revised the country’s GDP growth downwards for 2023 by 1.3 per cent to 2.8 per cent due to constrained oil production and tightening financial conditions. As a result of a cut in production by Opec+, it slashed the growth forecast of other oil-exporting nations too. Opec+ members have announced production cuts twice this year – once in April and then in June.

For the GCC region, the World Bank slashed the 2023 projection by 1.3 per cent to 2.4 per cent but revised upward the 2024 projection by 0.8 per cent up to 3.2 per cent.

For the Middle East and North Africa (Mena) region, it slashed the growth forecast by 1.3 per cent to 2.2 per cent and hiked the 2024 forecast by 0.6 per cent to 3.3 per cent.

The Mena region “entered 2023 with solid growth momentum in oil-exporting economies owing to high oil prices— which had helped these economies grow at a decade-high rate in 2022 — and ongoing recoveries in services sectors. Purchasing managers’ indexes in oil exporters were in expansion territory in the first half of 2023,” it said.

Global projections

World Bank projected that global growth has slowed sharply from 3.1 per cent in 2022 to 2.1 per cent in 2023 and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates.

In the US, growth is expected to weaken significantly through 2023 and early 2024, mainly as a result of the lagged effects of the sharp rise in policy rates over the past year and a half. After growing 1.1 per cent in 2023, the US economy is likely to remain weak in 2024, decelerating to 0.8 per cent. Activity is expected to pick up toward the end of next year, as inflation eases and the effects of monetary policy tightening fade.

The World Bank said growth in the East Asia and Pacific (EAP) region is projected to strengthen to 5.5 per cent in 2023 from 3.5 per cent in 2022, as a recovery in China offsets slowing activity in most other regional economies.

In 2024 and 2025, growth in the region is expected to edge down to 4.6 per cent and 4.5 per cent respectively, as growth in China slows alongside broadly stable growth in the rest of the region. In China, growth is projected to rebound to 5.6 per cent in 2023, as the reopening, together with accumulated excess savings, supports household spending, particularly on contact-intensive services. Growth is then projected to moderate to 4.6 per cent in 2024 and 4.4 per cent in 2025, as reopening effects fade.

According to the Global Economic Prospects report, growth in Europe and Central Asia (ECA) is projected to edge up slightly in 2023, to 1.4 per cent. However, the outlook remains particularly uncertain due to Russia’s invasion of Ukraine and its repercussions.

In South Asia, growth is expected to slow marginally to 5.9 per cent in 2023 and more significantly to 5.1 per cent in 2024. Growth in India is expected to slow to 6.3 per cent in the 2023-24 fiscal year, a 0.3 percentage point downward revision from January due to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation. Growth is projected to pick up slightly through 2025-26 as inflation moves back toward the midpoint of the tolerance range and reforms payoff. India will remain the fastest-growing economy of the largest emerging and developing economies, the report said.

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